Lafarge Africa: Trade, Other Receivables Slow Down Revenue

Kayode Tokede 

With about 43.11 per cent increase in trade & other receivables, Lafarge Africa Plc recorded a slow growth in revenue but maintained effective finance management in finance cost and income to boost profit and shareholders return on investment. 

The cement manufacturing company in its audited financial statement for full year ended December 31, 2021 reported N7.2billion trade & other receivables from N5.03billion reported in 2020. 

Also, from the balance sheet position, the group reported 34 per cent increase in trade and other payables to N103.2billion in 2021 from N76.9billion in 2020. Trade payables are obligations to pay for goods or services that have been acquired from suppliers in the ordinary course of business.

However, the group closed 2021 financial year with total assets of about four per cent increase to N526.8billion from N507.2billion reported in 2020. 

As total non-current assets dropped by 3.4 per cent to N390.26billion in 2021 from N404.14billion reported in 2020, total current assets rose by 33 per cent closed at N136.57 billion from N103.07 billion reported in 2020.

The group’s total liabilities inched up by 0.5 per cent to N148.3billion in 2021 from N147.6billion in 2021, driven by about three per cent increase in current liabilities to N131.05billion in 2021 from N127.6billion in 2020.

Total non-current liabilities, however, closed 2021 at N17.22billion, a decline of 14 per cent from N20.02billion reported in 2020.  

Lafarge Africa reported N378.56billion total equity in 2021, an increase of 46 per cent from N259.6billion in 2020. 

The interplay between current assets and current liabilities dragged the group’ working to N5.5billion in 2021 as against a deficit of N24.48billion in 2020. 

Consequently, the proportion of total equity/ total assets improved from 51.19 per cent in 2020 to 71.9 per cent in 2021, while total liabilities contribution to total assets dropped to 24.9 per cent in 2021 from 25.15per cent in 2020. 

The group’s total loans and borrowings dropped to 53.18 per cent from N49.73billion in 2020 to N23.29billion in 2021. As Long term loans & borrowing dropped by 52 per cent to N2.48billion from N5.14billion, while short-term loans & borrowings closed 2021 at N20.8billion, a decline of 53.3 per cent from N44.59billion in 2020. 

Profit emerges stronger 

For the financial year ended December 31, 2021, Lafarge Africa reported a stronger profit before tax and profit after tax, driven by growth in revenue and effective management of finance as the management cut borrowings. 

Lafarge’s Cement revenue grew by 27 per cent to N293.09billion in 2021 from N230.57billion in 2020, driven by revenue generated from Cement sales that grew by 26.1 per cent to N285.12 billion in 2021 from N22618 billion reported in 2020. 

Revenue generated from aggregate and concrete appreciated significantly by 78 per cent to N7.63billion in 2021 from N4.29billion in 2020, while revenue from “Other products that represent revenue earned from the sale of mortar”  moved from N102.3million to N338.59million in 2021.

Cost of sales (CoS) in 2021 was N160.5billion, an increase of 32 per cent from N121.72billion in 2020. The breakdown of Lafarge Africa’s key drives to Cost of sales revealed that the group reported N88.5billion variable costs that comprises of Fuel and power and Raw materials and consumables in 2021 from N60.85billion in 2020. 

Maintenance cost also grew by 368.8 per cent to N14.61billion in 2021 from N8.47billion in 2020. 

The company noted that: “During 2021, the group and company modified the classification of distribution costs on its products to reflect more appropriately the nature of the expense, which is consistent with the accounting policy of the group and company. Comparative amounts in the statement of profit or loss were reclassified for consistency. As a result, N52.5 billion (2020:N41.6 billion) for the Group and N47.8 billion (2020:N36.5 billion) for the Company relating to distribution costs were reclassified from cost of sales to selling and distribution costs.”

Consequently, CoS/Revenue grew from 52.8 per cent in 2020 to 54.76 per cent in 2021. 

Selling and distribution cost grew by 24.3 per cent to N56.98billion in 2021 from n45.84billioni in 2020 as administrative expenses increased by 15.6 per cent to N21.2billion in 2021 from N18.3 billion in 2021. 

Major contributors to expenses were Distribution variable costs in selling and distribution that moved from N39.84billion in 2020 to N47.3billion, while Salaries and other staff related costs in administrative expenses grew significantly by 39.3 per cent to N8.62billion in 2021 from N6.19billion in 2020. 

Other administrative by nature, according to the company was: “In 2020, the Company renewed an agreement with the Cross River state government to advance an amount not exceeding N2.8 billion annually as payments for all taxes, dues and levies payable in the state. 

“The renewed agreement, which is for a three-year period which commenced in April 2020, which effectively exempts the Company from all Cross River State and local government taxes, dues and levies during the agreed period. In line with the agreement, the Company made an advance payment of N2.8 billion, of which N2 billion relates to the current financial year. 

“N0.8 billion advance payment brought forward in the year, has also been amortised in the income statement in current year. These amounts have been included in the consolidated and separate statements of profit or loss and other comprehensive income as Cost of sales N0.8 billion (under Note 8 – Distribution variable cost) and Administrative expenses N2 billion (Under Note 9 – Administrative expenses)”

This brings Lafarge Africa’s total operating expenses in 2021 to N78.13billion in 2021 from N64.14billion in 2020.  

On the heels of growth in profit, the management had proposed interim gross dividend of 100koo on every ordinary share in issue amounting to N16.11billion and proposed additional final dividend of 100kobo, amounting to N16.11billion, bringing the total to 200kobo (2020: 100K) on every ordinary share in issue amounting to a total gross dividend of N32.22billion for 2021 (2020: N16.11billion). 

disposal of property

Other income that comprises of gain on disposal of property, plant and equipment, Government grants, Gain on disposal of investment in joint venture and Sale of scraps and other miscellaneous income closed 2021 at N687.09million from N978.15 million reported in 2020. 

The government had granted Lafarge Africa N381.65million in 2021 from N292.01million reported in 2020.

According to the company,: “Government grants arise from below-market interest rate government loans (CBN/BOI Intervention Fund loan) obtained in July 2011 and in March 2018. There are no unfulfilled conditions or contingencies attached to these grants.”

However, in the year under review, the company reported finance income of N1.74billion from N1.18billion reported in 2020 due to N1.19billion net foreign exchange gain. 

The group’s finance charges dropped by 45.7 per cent to N5.28billion in 2021 from N9.7billion reported in 2020, primarily driven by 52 per cent decline on interest on borrowings that moved from N7.86billion in 2020 to N3.76billion in 2021. 

Therefore, the Group closed 2021 with N62.25billion profit before tax, an increase of 66 per cent from N37.57billion reported in 2020. The group tax expenses grew by 68per cent to N10.78billion to position profit for the year at N51billion in 2021 from N30.84billion reported in 2020.

The management had proposed an interim gross dividend of 100kobo, amounting to N16.11billioon, payable from the pioneer profits. 

The Board of directors is proposed additional gross dividend of 100kobo, amounting to N16.11billion, bringing the total to 200kobo (2020: 100kobo) on every ordinary share in issue, amounting to a total gross dividend of N32.21billion for 2021 (2020: N16.11). 

The additional dividend proposed, if approved by shareholders, is payable from the pioneer profits and is not subject to deduction of withholding tax. 

2021 financials and future outlook

CEO of Lafarge Africa, Khaled El Dokani in a statement said: “Our 2021 performance showed significant improvement, with net sales of +27.1per cent, recurring EBIT of +42.6per cent and net income of +65.4per cent, compared to FY 2020 results. 

“We are equally pleased with the progress we are making on sustainability; our use of affordable clean energy and agro-ecology footprint are in accordance with our net zero pledge journey”.

On 2022 outlook, he maintained that the company is execrated good demand momentum and maintained that it would continue to maximize volume opportunities across our markets and actively manage our costs.

“We will consolidate our efforts on Sustainability,” he added. 

Lafarge Africa has the widest footprint in Nigeria with cement operations in the South West (Ewekoro and Sagamu in Ogun State), North East (Ashaka, in Gombe State), South East (Mfamosing, Cross Rivers State) with Ready-Mix operations in Lagos, Abuja and Port Harcourt. Lafarge Africa has a current installed cement production capacity of 10.5Mtpa.